March performance was -5.25 %, bringing the YTD to 6.9 %. After eight months of positive returns, the markets turned against the GPAM strategy. While it is expected that correlated markets would move in the same direction, it is unusual that non-correlated markets and various positions in a strategy such as ours, with no directional market bias, would all be losers in the same month.
There was nothing exceptional in the markets for most of the month, but at a certain point the spreads, the Euro, and finally the settlement prices on the spreads all went against the strategy, and against the statistics as well. This was especially odd given that many of the spreads that were in place are not in correlated markets: petroleum, natural gas, hogs, cattle, soybean oil, eurodollars etc. It is also incredibly unusual for each of the spreads to individually deviate from the statistical norms. Settlement prices were against the open positions in accounts at the end of the month. Normally this is not a terrible thing by itself, because of the spread strategies. Unfortunately, this month the overall spread strategies, as I already stated, were not working. To compound the loss, the Euro hit a low. Many client have Euro accounts, but performance of a CTA is calculated in US Dollars. So if the Euro goes down, the performance is that much worse.
The markets continue to exhibit abnormal behavior, however this does at times present opportunity for speculative investors. There is a lot of uncertainty in the global economies, and this is reflected in some of the extreme volatilities of various commodity markets. We will continue to take the volatility and market environment into consideration while evaluating potential trades. It is my opinion that we should see a return to normalcy as we move forward, though the timing in a great unknown.
The markets do exhibit unusual characteristics at time, and thorough analysis and statistical models are not always correct. We remain committed to the program and believe in its potential for profitability over time.
As always, should you need any clarification or have questions about the CTA do not hesitate to contact me.
— Gregory Placsintar
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THE RISK OF LOSS IN TRADING COMMODITIES CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.